Problem 2.1 Frankfurt and New YorkWhat is the exchange rate between the dollar and the euro?AssumptionsValuesBuy a US dollar in Frankfurt for (in euros/$)0.9200 Which is equivalent, the reciprocal, in $/euro$1.0870Buy a euro in NY for (in $/euros)$1.0870Which is equivalent, the reciprocal, in euros/$0.9200

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Problem 2.2 Peso exchange rate changePeso was "devalued" from 3.2 per dollar to 5.5 per dollar.Any time a government sets, or resets, the value of a currency,it is a managed or fixed exchange rate. A governmental decisionto decrease a currency's value when it is a fixed exchange rate istermed a "devaluation."Calculation of Percentage Change in ValueValuesInitial exchange rate (peso/$)3.20 Devalued exchange rate (peso/$)5.50 Percentage change in peso value-41.82%(beginning rate - ending rate) / (ending rate)

Problem 2.3 Good as GoldWhat if gold had cost $38.00 per ounce?Gold StandardAssumptionsValuesWhat IfPrice of an ounce of gold in US dollars ($/oz)$20.67$38.00Price of an ounce of gold in British pounds (₤/oz)£4.2474£4.2474What is the implied US$/₤ exchange rate?$4.8665$8.9466(dollar price of an ounce / pound price of an ounce)

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